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Form 424B2 BANK OF MONTREAL /CAN/

May 26, 2016 6:10 AM EDT
The information in this preliminary pricing supplement is not complete and may be changed. This preliminary pricing supplement is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Registration Statement No. 333-196387
Filed Pursuant to Rule 424(b)(2)
 
Subject to Completion, dated May 26, 2016
Pricing Supplement to the Prospectus dated June 27, 2014, the Prospectus Supplement
dated June 27, 2014 and the Product Supplement dated October 1, 2015
US$●
Senior Medium-Term Notes, Series C
Contingent Risk Absolute Return Notes due June 30, 2022
Linked to the EURO STOXX 50® Index
 
·
The notes are designed for investors who seek a 110% leveraged return based on any appreciation in the level of the EURO STOXX 50® Index (the “Underlying Asset”). In addition, if the Final Level of the Underlying Asset is less than its Initial Level but is greater than or equal to the Barrier Level, you will receive a positive return on your notes equal to the percentage by which that level declines up to the Maximum Downside Redemption Amount (as defined below) of $1,300 per $1,000 in principal amount of the notes.
 
·
The Barrier Level will be 70% of the Initial Level.
 
·
If the Final Level is less than the Barrier Level, investors will lose 1% of their principal amount for each 1% decrease in the level of the Underlying Asset from the pricing date to the valuation date.
 
·
An investor in the notes may lose all or a portion of their principal amount at maturity.
 
·
The notes will not bear interest. The notes will not be listed on any securities exchange.
 
·
Any payment at maturity is subject to the credit risk of Bank of Montreal.
 
·
The offering is expected to price on or about June 27, 2016, and the notes are expected to settle through the facilities of The Depository Trust Company on or about June 30, 2016.
 
·
The notes are scheduled to mature on or about June 30, 2022.
 
·
The notes will be issued in minimum denominations of $1,000 and integral multiples of $1,000.
 
·
The CUSIP number of the notes is 06367TFE5.
 
·
Our subsidiary, BMO Capital Markets Corp. (“BMOCM”), is the agent for this offering.  See “Supplemental Plan of Distribution (Conflicts of Interest)” below.
 
Investing in the notes involves risks, including those described in the “Selected Risk Considerations” section beginning on page P-4 of this pricing supplement, “Additional Risk Factors Relating to the Notes” section beginning on page PS-5 of the product supplement, and “Risk Factors” section beginning on page S-1 of the prospectus supplement and on page 7 of the prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these notes or passed upon the accuracy of this pricing supplement, the product supplement, the prospectus supplement or the prospectus.  Any representation to the contrary is a criminal offense.
The notes will be our unsecured obligations and will not be savings accounts or deposits that are insured by the United States Federal Deposit Insurance Corporation, the Bank Insurance Fund, the Canada Deposit Insurance Corporation or any other governmental agency or instrumentality or other entity.
On the date of this preliminary pricing supplement, the estimated initial value of the notes is $874.30 per $1,000 in principal amount, based on the terms set forth above. The estimated initial value of the notes on the pricing date may differ from this value but will not be less than $850.00 per $1,000 in principal amount.  However, as discussed in more detail in this pricing supplement, the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy.
 
 
Price to Public(1)
Agent’s Commission(1)
Proceeds to Bank of Montreal
       
Per Note
US$1,000
US$35.00
US$965.00
       
Total
US$●
US$●
US$●
 
(1)          Certain dealers who purchase the notes for sale to certain fee-based advisory accounts may forego some or all of their selling concessions, fees or commissions. The public offering price for investors purchasing the notes in these accounts may be between $965.00 and $1,000 per $1,000 in principal amount.
   
BMO CAPITAL MARKETS
 
 
 
 
 
     
Key Terms of the Notes:
 
Underlying Asset:
EURO STOXX 50® Index (Bloomberg symbol: SX5E). See the section below entitled “The Underlying Asset” for additional information about the Underlying Asset.
   
Payment at Maturity:
If the Percentage Change is positive, then the amount that the investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
 
Principal Amount + (Principal Amount × Percentage Change x Upside Leverage Factor)
 
If the Percentage Change is less than or equal to zero, but is not less than the Barrier Percentage, then the amount that the investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
 
Principal Amount + (Principal Amount × (-1 x Percentage Change))
   
 
In this case, subject to our credit risk, investors will receive a positive return on the notes up to the Maximum Downside Redemption Amount (as defined below), even though the level of the Underlying Asset has declined since the pricing date.
 
If the Percentage Change is less than the Barrier Percentage, then the amount that the investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
   
 
Principal Amount + (Principal Amount × Percentage Change)
 
In this case, investors will lose all or a portion of the principal amount of the notes.
   
Initial Level:
The closing level of the Underlying Asset on the pricing date. The Initial Level will be set forth in the final pricing supplement for the notes.
   
Final Level:
The closing level of the Underlying Asset on the valuation date.
   
Percentage Change:
Final Level – Initial Level, expressed as a percentage.
         Initial Level
   
Barrier Level:
70% of the Initial Level.
   
Barrier Percentage:
-30%
   
Maximum Downside
Redemption Amount:
$1,300
   
Upside Leverage Factor:
110%
   
Pricing Date:
On or about June 27, 2016.
   
Settlement Date:
On or about June 30, 2016, as determined on the pricing date.
   
Valuation Date:
On or about June 27, 2022, subject to adjustment.
   
Maturity Date:
On or about June 30, 2022, as determined on the pricing date.
   
CUSIP Number:
06367TFE5
   
Calculation Agent:
BMO Capital Markets Corp.
   
Selling Agent:
BMO Capital Markets Corp.
 
The pricing date and settlement date are subject to change. The actual pricing date, settlement date, valuation date, maturity date, Initial Level and Barrier Level will be set forth in the final pricing supplement.
 
We may use this pricing supplement in the initial sale of the notes. In addition, BMOCM or another of our affiliates may use this pricing supplement in market-making transactions in any notes after their initial sale. Unless our agent or we inform you otherwise in the confirmation of sale, this pricing supplement is being used in a market-making transaction.
     
 
 
P-2
 
 
Additional Terms of the Notes
 
You should read this pricing supplement together with the product supplement dated October 1, 2015, the prospectus supplement dated June 27, 2014 and the prospectus dated June 27, 2014.  This pricing supplement, together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours or the agent. You should carefully consider, among other things, the matters set forth in “Additional Risk Factors Relating to the Notes” in the product supplement, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
 
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
 
 
·
Product supplement dated October 1, 2015:
 
 
·
Prospectus supplement dated June 27, 2014:
 
 
·
Prospectus dated June 27, 2014:
 
Our Central Index Key, or CIK, on the SEC website is 927971.  As used in this pricing supplement, “we,” “us” or “our” refers to Bank of Montreal.
 
 
P-3
 
 
Selected Risk Considerations
 
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Underlying Asset.  These risks are explained in more detail in the “Additional Risk Factors Relating to the Notes” section of the product supplement.
 
 
·
Your investment in the notes may result in a loss. — You may lose some or all of your investment in the notes. The payment at maturity will be based on the Final Level.  If the Percentage Change is less than the Barrier Percentage, you will lose 1% of the principal amount for each 1% decrease in the level of the Underlying Asset. Accordingly, you could lose some or all of the principal amount of your notes.
 
 
·
Your investment is subject to the credit risk of Bank of Montreal. — Our credit ratings and credit spreads may adversely affect the market value of the notes. Investors are dependent on our ability to pay the amount due at maturity, and therefore investors are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the notes.
 
 
·
Potential conflicts. — We and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation agent. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the notes. We or one or more of our affiliates may also engage in trading securities included in the Underlying Asset on a regular basis as part of our general broker-dealer and other businesses, for proprietary accounts, for other accounts under management or to facilitate transactions for our customers. Any of these activities could adversely affect the level of the Underlying Asset and, therefore, the market value of the notes. We or one or more of our affiliates may also issue or underwrite other securities or financial or derivative instruments with returns linked or related to changes in the performance of the Underlying Asset. By introducing competing products into the marketplace in this manner, we or one or more of our affiliates could adversely affect the market value of the notes.
 
 
·
Our initial estimated value of the notes will be lower than the price to public. — Our initial estimated value of the notes is only an estimate, and is based on a number of factors.  The price to public of the notes will exceed our initial estimated value, because costs associated with offering, structuring and hedging the notes are included in the price to public, but are not included in the estimated value.  These costs include the underwriting discount and selling concessions, and the profits that we and our affiliates expect to realize for assuming the risks in hedging our obligations under the notes and the estimated cost of hedging these obligations.  The initial estimated value may be as low as the amount indicated on the cover page of this pricing supplement.
 
 
·
Our initial estimated value does not represent any future value of the notes, and may also differ from the estimated value of any other party. — Our initial estimated value of the notes as of the date of this preliminary pricing supplement is, and our estimated value as determined on the pricing date will be, derived using our internal pricing models.  This value is based on market conditions and other relevant factors, which include volatility of the Underlying Asset, dividend rates and interest rates.  Different pricing models and assumptions could provide values for the notes that are greater than or less than our initial estimated value.  In addition, market conditions and other relevant factors after the pricing date are expected to change, possibly rapidly, and our assumptions may prove to be incorrect.  After the pricing date, the value of the notes could change dramatically due to changes in market conditions, our creditworthiness, and the other factors set forth in this pricing supplement and the product supplement.  These changes are likely to impact the price, if any, at which we or BMOCM would be willing to purchase the notes from you in any secondary market transactions.  Our initial estimated value does not represent a minimum price at which we or our affiliates would be willing to buy your notes in any secondary market at any time.
 
 
·
The terms of the notes are not determined by reference to the credit spreads for our conventional fixed-rate debt. — To determine the terms of the notes, we will use an internal funding rate that represents a discount from the credit spreads for our conventional fixed-rate debt.  As a result, the terms of the notes are less favorable to you than if we had used a higher funding rate.
 
 
·
Certain costs are likely to adversely affect the value of the notes. — Absent any changes in market conditions, any secondary market prices of the notes will likely be lower than the price to public.  This is because any secondary market prices will likely take into account our then-current market credit spreads, and because any secondary market prices are likely to exclude all or a portion of the agent’s commission and the hedging profits and estimated hedging costs that are included in the price to public of the notes and that may be reflected on your account statements.  In addition, any such price is also likely to reflect a discount to account for costs associated with establishing or unwinding any related hedge transaction, such as dealer discounts, mark-ups and other transaction costs.  As a result, the price, if any, at which BMOCM or any other party may be willing to purchase the notes from you in secondary market transactions, if at all, will likely be lower than the price to public.  Any sale that you make prior to the maturity date could result in a substantial loss to you.
 
 
P-4
 
 
 
·
You will not have any shareholder rights and will have no right to receive any shares of any company included in the Underlying Asset at maturity. — Investing in your notes will not make you a holder of any shares of any company included in the Underlying Asset.  Neither you nor any other holder or owner of the notes will have any voting rights, any right to receive dividends or other distributions or any other rights with respect to those securities. Accordingly, an investment in the components of the Underlying Asset could outperform an investment in the notes.
 
 
·
Changes that affect the Underlying Asset will affect the market value of the notes and the amount you will receive at maturity. — The policies of STOXX Limited (“STOXX”), the sponsor of the Underlying Asset, concerning the calculation of the Underlying Asset, additions, deletions or substitutions of the components of the Underlying Asset and the manner in which changes affecting those components, such as stock dividends, reorganizations or mergers, may be reflected in the Underlying Asset and, therefore, could affect the level of the Underlying Asset, the amount payable on the notes at maturity and the market value of the notes prior to maturity.  The amount payable on the notes and their market value could also be affected if STOXX changes these policies, for example, by changing the manner in which it calculates the Underlying Asset, or if STOXX discontinues or suspends the calculation or publication of the Underlying Asset.  None of our proceeds from the issuance of the notes will be delivered to STOXX.
 
 
·
We have no affiliation with STOXX and will not be responsible for any actions taken by STOXX. — STOXX is not an affiliate of ours and will not be involved in the offering of the notes in any way. Consequently, we have no control over the actions of STOXX, including any actions of the type that would require the calculation agent to adjust the payment to you at maturity. STOXX has no obligation of any sort with respect to the notes. Thus, STOXX has no obligation to take your interests into consideration for any reason, including in taking any actions that might affect the value of the notes.
 
 
·
Lack of liquidity. — The notes will not be listed on any securities exchange.  BMOCM may offer to purchase the notes in the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which you may be able to trade the notes is likely to depend on the price, if any, at which BMOCM is willing to buy the notes.
 
 
·
Hedging and trading activities.  — We or any of our affiliates may carry out hedging activities related to the notes, including purchasing or selling securities included in the Underlying Asset, or futures or options relating to the Underlying Asset, or other derivative instruments with returns linked or related to changes in the performance of the Underlying Asset.  We or our affiliates may also engage in trading relating to the Underlying Asset from time to time. Any of these hedging or trading activities on or prior to the pricing date and during the term of the notes could adversely affect our payment to you at maturity.
 
 
·
Many economic and market factors will influence the value of the notes. — In addition to the level of the Underlying Asset and interest rates on any trading day, the value of the notes will be affected by a number of economic and market factors that may either offset or magnify each other, and which are described in more detail in the product supplement.
 
 
·
You must rely on your own evaluation of the merits of an investment linked to the Underlying Asset. —   In the ordinary course of their businesses, our affiliates from time to time may express views on expected movements in the level of the Underlying Asset or the prices of the securities included in the Underlying Asset.  One or more of our affiliates have published, and in the future may publish, research reports that express views on the Underlying Asset or these securities.  However, these views are subject to change from time to time.  Moreover, other professionals who deal in the markets relating to the Underlying Asset at any time may have significantly different views from those of our affiliates.  You are encouraged to derive information concerning the Underlying Asset from multiple sources, and you should not rely on the views expressed by our affiliates.
 
Neither the offering of the notes nor any views which our affiliates from time to time may express in the ordinary course of their businesses constitutes a recommendation as to the merits of an investment in the notes.
 
 
·
Significant aspects of the tax treatment of the notes are uncertain.  — The tax treatment of the notes is uncertain.  We do not plan to request a ruling from the Internal Revenue Service or from any Canadian authorities regarding the tax treatment of the notes, and the Internal Revenue Service or a court may not agree with the tax treatment described in this pricing supplement.
 
The Internal Revenue Service has issued a notice indicating that it and the Treasury Department are actively considering whether, among other issues, a holder should be required to accrue interest over the term of an instrument such as the notes even though that holder will not receive any payments with respect to the notes until maturity and whether all or part of the gain a holder may recognize upon sale or maturity of an instrument such as the notes could be treated as ordinary income.  The outcome of this process is uncertain and could apply on a retroactive basis.
 
 
P-5
 
 
Please read carefully the section entitled “U.S. Federal Tax Information” in this pricing supplement, the section entitled “Supplemental Tax Considerations—Supplemental U.S. Federal Income Tax Considerations” in the accompanying product supplement, the section “United States Federal Income Taxation” in the accompanying prospectus and the section entitled “Certain Income Tax Consequences” in the accompanying prospectus supplement.  You should consult your tax advisor about your own tax situation.
 
Additional Risks Relating to the Underlying Asset
 
 
·
An investment in the notes is subject to risks associated with foreign securities markets. — The Underlying Asset tracks the value of certain European equity securities.  You should be aware that investments in securities linked to the value of foreign equity securities involve particular risks.  The foreign securities markets comprising the Underlying Asset may have less liquidity and may be more volatile than U.S. or other securities markets and market developments may affect foreign markets differently from U.S. or other securities markets.  Direct or indirect government intervention to stabilize these foreign securities markets, as well as cross-shareholdings in foreign companies, may affect trading prices and volumes in these markets.  Also, there is generally less publicly available information about foreign companies than about those U.S. companies that are subject to the reporting requirements of the U.S. Securities and Exchange Commission, and foreign companies are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies.
 
Prices of securities in Europe are subject to political, economic, financial and social factors that apply in that market.  These factors, which could negatively affect those securities markets, include the possibility of recent or future changes in European economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to European companies or investments in European equity securities and the possibility of fluctuations in the rate of exchange between currencies, the possibility of outbreaks of hostility and political instability and the possibility of natural disaster or adverse public health development in the region.  Moreover, European economies may differ favorably or unfavorably from the U.S. economy in important respects such as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
 
 
·
An investment in the notes is subject to foreign currency exchange rate risk. — The securities composing the Underlying Asset are traded in euros. The value of the notes will not be adjusted for exchange rate fluctuations between the U.S. dollar and the euro, however any currency fluctuations could affect the level of the Underlying Asset. Accordingly, the market value of the notes and the payments on the notes could be adversely affected as a result of such exchange rate fluctuations.
 
 
P-6
 
 
Hypothetical Return on the Notes at Maturity
 
The following table and examples illustrate the hypothetical return at maturity on a $1,000 investment in the notes.  The “return,” as used in this section is the number, expressed as a percentage, which results from comparing the payment at maturity per $1,000 in principal amount of the notes to $1,000.  The hypothetical total returns set forth below are based on a hypothetical Initial Level of 100, the Barrier Percentage of -30% (70% of the hypothetical Initial Level) and the Upside Leverage Factor of 110%.  The hypothetical returns set forth below are for illustrative purposes only and may not be the actual returns applicable to investors in the notes.  The numbers appearing in the following table and in the examples below have been rounded for ease of analysis.
 
Hypothetical Final Level
Percentage Change
Return on the Notes
Payment at Maturity
0.00
-100.00%
-100.00%
$0.00
10.00
-90.00%
-90.00%
$100.00
20.00
-80.00%
-80.00%
$200.00
30.00
-70.00%
-70.00%
$300.00
40.00
-60.00%
-60.00%
$400.00
50.00
-50.00%
-50.00%
$500.00
60.00
-40.00%
-40.00%
$600.00
70.00
-30.00%
30.00%
$1,300.00
80.00
-20.00%
20.00%
$1,200.00
90.00
-10.00%
10.00%
$1,100.00
95.00
-5.00%
5.00%
$1,050.00
100.00
0.00%
0.00%
$1,000.00
105.00
5.00%
5.50%
$1,055.00
110.00
10.00%
11.00%
$1,110.00
115.00
15.00%
16.50%
$1,165.00
120.00
20.00%
22.00%
$1,220.00
130.00
30.00%
33.00%
$1,330.00
140.00
40.00%
44.00%
$1,440.00
 
Hypothetical Examples of Amounts Payable at Maturity
 
The following examples illustrate how the returns set forth in the table above are calculated.
 
Example 1: The level of the Underlying Asset decreases from the hypothetical Initial Level of 100 to a hypothetical Final Level of 50 representing a Percentage Change of -50%.  Because the Percentage Change is less than the Barrier Percentage, the investor receives a payment at maturity of $500 per $1,000 in principal amount of the notes, calculated as follows:
 
Principal Amount + (Principal Amount x Percentage Change) = Payment at Maturity
 
$1,000 + ($1,000 x -50%) = $500.00
 
Example 2: The level of the Underlying Asset decreases from the hypothetical Initial Level of 100 to a hypothetical Final Level of 90, representing a Percentage Change of -10%.  Because the Percentage Change is less than zero but is not less than the Barrier Percentage, the investor receives a payment at maturity of $1,100 per $1,000 in principal amount of the notes, calculated as follows:
 
Principal Amount + [Principal Amount x (-1 x Percentage Change)] = Payment at Maturity
 
$1,000 + [$1,000 × (-1 x -10%)] = $1,100.00
 
Example 3: The level of the Underlying Asset increases from the hypothetical Initial Level of 100 to a hypothetical Final Level of 110, representing a Percentage Change of 10%.  Because the Percentage Change is positive, the investor receives a payment at maturity of $1,110.00 per $1,000 in principal amount of the notes, calculated as follows:
 
Principal Amount + [Principal Amount x Percentage Change x Upside Leverage Factor] = Payment at Maturity
 
$1,000 + [$1,000 x 10% x 110%] = $1,110.00
 
 
P-7
 
 
U.S. Federal Tax Information
 
By purchasing the notes, each holder agrees (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to treat each note as a pre-paid cash-settled derivative contract for U.S. federal income tax purposes.  However, the U.S. federal income tax consequences of your investment in the notes are uncertain and the Internal Revenue Service could assert that the notes should be taxed in a manner that is different from that described in the preceding sentence.  Please see the discussion (including the opinion of our counsel Morrison & Foerster LLP) in the product supplement under “Supplemental Tax Considerations—Supplemental U.S. Federal Income Tax Considerations,” which applies to the notes.
 
Recently finalized Treasury regulations provide that withholding on “dividend equivalent” payments (as discussed in the product supplement), if any, will not apply to notes issued before January 1, 2017.
 
Supplemental Plan of Distribution (Conflicts of Interest)
 
BMOCM will purchase the notes from us at a purchase price reflecting the commission set forth on the cover page of this pricing supplement.  BMOCM has informed us that, as part of its distribution of the notes, it will reoffer the notes to other dealers who will sell them.  Each such dealer, or additional dealer engaged by a dealer to whom BMOCM reoffers the notes, will purchase the notes at an agreed discount to the initial price to public.
 
Certain dealers who purchase the notes for sale to certain fee-based advisory accounts may forego some or all of their selling concessions, fees or commissions.  The public offering price for investors purchasing the notes in these accounts may be less than 100% of the principal amount, as set forth on the cover page of this document.  Investors that hold their notes in these accounts may be charged fees by the investment advisor or manager of that account based on the amount of assets held in those accounts, including the notes.
 
We own, directly or indirectly, all of the outstanding equity securities of BMOCM, the agent for this offering. In accordance with FINRA Rule 5121, BMOCM may not make sales in this offering to any of its discretionary accounts without the prior written approval of the customer.
 
We reserve the right to withdraw, cancel or modify the offering of the notes and to reject orders in whole or in part.  You may cancel any order for the notes prior to its acceptance.
 
You should not construe the offering of the notes as a recommendation of the merits of acquiring an investment linked to the Underlying Asset or as to the suitability of an investment in the notes.
 
BMOCM may, but is not obligated to, make a market in the notes.  BMOCM will determine any secondary market prices that it is prepared to offer in its sole discretion.
 
We may use this pricing supplement in the initial sale of the notes.  In addition, BMOCM or another of our affiliates may use the final pricing supplement relating to the notes in market-making transactions in any notes after their initial sale.  Unless BMOCM or we inform you otherwise in the confirmation of sale, the final pricing supplement is being used by BMOCM in a market-making transaction.
 
For a period of approximately three months following issuance of the notes, the price, if any, at which we or our affiliates would be willing to buy the notes from investors, and the value that BMOCM may also publish for the notes through one or more financial information vendors and which could be indicated for the notes on any brokerage account statements, will reflect a temporary upward adjustment from our estimated value of the notes that would otherwise be determined at that time. This temporary upward adjustment represents a portion of (a) the hedging profit that we or our affiliates expect to realize over the term of the notes and (b) the underwriting discount and selling concessions paid in connection with this offering.  The amount of this temporary upward adjustment will decline to zero on a straight-line basis over the three-month period.
 
Additional Information Relating to the Estimated Initial Value of the Notes
 
Our estimated initial value of the notes on the date of this preliminary pricing supplement, and that will be set forth on the cover page of the final pricing supplement relating to the notes, equals the sum of the values of the following hypothetical components:
 
 
·
a fixed-income debt component with the same tenor as the notes, valued using our internal funding rate for structured notes; and
 
 
·
one or more derivative transactions relating to the economic terms of the notes.
 
 
P-8
 
 
The internal funding rate used in the determination of the initial estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt.  The value of these derivative transactions are derived from our internal pricing models.  These models are based on factors such as the traded market prices of comparable derivative instruments and on other inputs, which include volatility, dividend rates, interest rates and other factors.  As a result, the estimated initial value of the notes on the pricing date will be determined based on market conditions at that time.
 
The Underlying Asset
 
All disclosures contained in this pricing supplement regarding the Underlying Asset, including, without limitation, its make up, method of calculation, and changes in its components, have been derived from publicly available sources. The information reflects the policies of, and is subject to change by, STOXX. STOXX, which owns the copyright and all other rights to the Underlying Asset, has no obligation to continue to publish, and may discontinue publication of, the Underlying Asset. The consequences of STOXX discontinuing publication of the Underlying Asset are discussed in the section of the product prospectus supplement entitled “General Terms of the Notes—Unavailability of the Level of the Underlying Asset on a Valuation Date.” Neither we nor BMOCM accepts any responsibility for the calculation, maintenance or publication of the Underlying Asset or any successor index.
 
The Underlying Asset was created by STOXX, a wholly-owned subsidiary of Deutsche Börse AG.  Publication of the Underlying Asset began in February 1998, based on an initial Index level of 1,000 at December 31, 1991. Additional information about the Underlying Asset is available on the STOXX Limited website: http://www.stoxx.com.  However, information included in that website is not included or incorporated by reference in this pricing supplement.
 
Underlying Asset Composition and Maintenance
 
For each of the 19 EURO STOXX regional supersector indices, the stocks are ranked in terms of free-float market capitalization. The largest stocks are added to the selection list until the coverage is close to, but still less than, 60% of the free-float market capitalization of the corresponding supersector index.  If the next highest-ranked stock brings the coverage closer to 60% in absolute terms, then it is also added to the selection list. All current stocks in the index are then added to the selection list.  All of the stocks on the selection list are then ranked in terms of free-float market capitalization to produce the final index selection list.  The largest 40 stocks on the selection list are selected; the remaining 10 stocks are selected from the largest remaining current stocks ranked between 41 and 60; if the number of stocks selected is still below 50, then the largest remaining stocks are selected until there are 50 stocks. In exceptional cases, STOXX’s management board can add stocks to and remove them from the selection list.
 
The index stocks are subject to a capped maximum index weight of 10%, which is applied on a quarterly basis.
 
The Underlying Asset is composed of 50 component stocks of market sector leaders from within the 19 EURO STOXX® Supersector indices, which represent the Eurozone portion of the STOXX Europe 600® Supersector indices.  The index stocks have a high degree of liquidity and represent the largest companies across a wide range of market sectors.
 
Composition and Maintenance of the Underlying Asset
 
The composition of the Underlying Asset is reviewed annually, based on the closing stock data on the last trading day in August.  Changes in the composition of the Underlying Asset are made to ensure that it includes the 50 market sector leaders from within the EURO STOXX Index.
 
The free float factors for each component stock used to calculate the Underlying Asset, as described below, are reviewed, calculated, and implemented on a quarterly basis and are fixed until the next quarterly review.
 
The Underlying Asset is subject to a “fast exit rule.”  The index stocks are monitored for any changes based on the monthly selection list ranking.  A stock is deleted from the Underlying Asset if: (a) it ranks 75 or below on the monthly selection list and (b) it has been ranked 75 or below for a consecutive period of two months in the monthly selection list.  The highest-ranked stock that is not already an index stock will replace it.  Changes will be implemented on the close of the fifth trading day of the month, and are effective the next trading day.
 
The Underlying Asset is also subject to a “fast entry rule.”  All stocks on the latest selection lists and initial public offering (IPO) stocks are reviewed for a fast-track addition on a quarterly basis. A stock is added, if (a) it qualifies for the latest STOXX blue-chip selection list generated end of February, May, August or November and (b) it ranks within the “lower buffer” on this selection list.
 
The Underlying Asset is also reviewed on an ongoing basis.  Corporate actions (including initial public offerings, mergers and takeovers, spin-offs, delistings, and bankruptcy) that affect the Underlying Asset composition are immediately reviewed.  Any changes are announced, implemented, and effective in line with the type of corporate action and the magnitude of the effect.
 
 
P-9
 
 
Calculation of the EURO STOXX 50® Index
 
The Underlying Asset is calculated with the “Laspeyres formula,” which measures the aggregate price changes in the index stocks against a fixed base quantity weight.  The formula for calculating the Underlying Asset value can be expressed as follows:
 
Index = free float market capitalization of the index at the time                                                                                                           
                                  divisor of the index at the time
 
The “free float market capitalization of the index” is equal to the sum of the products of the closing price, number of shares, free float factor and the weighting cap factor for each component company as of the time that the Underlying Asset is being calculated.
 
The divisor of the Underlying Asset is adjusted to maintain the continuity of the Underlying Asset’s values across changes due to corporate actions, such as the deletion and addition of stocks, the substitution of stocks, stock dividends, and stock splits.
 
License Agreement
 
We have entered into a non-exclusive license agreement with STOXX, which grants us a license in exchange for a fee to use the Underlying Asset in connection with the issuance of certain securities, including the notes.
 
STOXX and its licensors (the “Licensors”) have no relationship with us or BMOCM, other than the licensing of the Underlying Asset and the related trademarks for use in connection with the notes.
 
STOXX and its Licensors do not:
 
 
·
sponsor, endorse, sell or promote the notes.
 
 
·
recommend that any person invest in the notes or any other securities.
 
 
·
have any responsibility or liability for or make any decisions about the timing, amount or pricing of the notes.
 
 
·
have any responsibility or liability for the administration, management or marketing of the notes.
 
 
·
consider the needs of the notes or the owners of the notes in determining, composing or calculating the Underlying Asset or have any obligation to do so.
 
STOXX and it Licensors will not have any liability in connection with the notes.  Specifically,
 
 
·
STOXX and its Licensors do not make any warranty, express or implied, and disclaim any and all warranty about:
 
 
§
the results to be obtained by the notes, the owner of the notes or any other person in connection with the use of the Underlying Asset and the data included in the Underlying Asset;
 
 
§
the accuracy or completeness of the Underlying Asset and its data;
 
 
§
the merchantability and the fitness for a particular purpose or use of the Underlying Asset or its data;
 
 
·
STOXX and its Licensors will have no liability for any errors, omissions or interruptions in the Underlying Asset or its data; and
 
 
·
any lost profits or indirect, punitive, special or consequential damages or losses, even if STOXX knows that they might occur.
 
The licensing agreement among us, BMOCM and STOXX is solely for the benefit of the parties thereto and not for the benefit of the owner of the notes or any other third parties.
 
 
P-10
 

Historical Information of the Underlying Asset
 
The following table sets forth the quarter-end high and low closing levels for the Underlying Asset from the first quarter of 2008 through May 24, 2016.
 
The historical levels of the Underlying Asset are provided for informational purposes only.  You should not take the historical levels of the Underlying Asset as an indication of its future performance, which may be better or worse than the levels set forth below.

Closing Levels of the Underlying Asset
 
   
High ($)
  
Low ($)
2008
First Quarter
4,339.23
  
3,431.82
 
Second Quarter
 3,882.28   3,340.27
 
Third Quarter
 3,445.66   3,000.83
 
Fourth Quarter
 3,113.82   2,165.91
         
2009
First Quarter
 2,578.43   1,809.98
 
Second Quarter
 2,537.35   2,097.57
 
Third Quarter
 2,899.12   2,281.47
 
Fourth Quarter
 2,992.08   2,712.30
         
2010
First Quarter
 3,017.85   2,631.64
 
Second Quarter
 3,012.65   2,488.50
 
Third Quarter
 2,827.27   2,507.83
 
Fourth Quarter
 2,890.64   2,650.99
         
2011
First Quarter
 3,068.00   2,721.24
 
Second Quarter
 3,011.25   2,715.88
 
Third Quarter
 2,875.67   1,995.01
 
Fourth Quarter
 2,476.92   2,090.25
         
2012
First Quarter
 2,608.42   2,286.45
 
Second Quarter
 2,501.18   2,068.66
 
Third Quarter
 2,594.56   2,151.54
 
Fourth Quarter
 2,659.95   2,427.32
         
2013
First Quarter
 2,749.27   2,570.52
 
Second Quarter
 2,835.87   2,511.83
 
Third Quarter
 2,936.20   2,570.76
 
Fourth Quarter
 3,111.37   2,902.12
         
2014
First Quarter
 3,172.43   2,962.49
 
Second Quarter
 3,314.80   3,091.52
 
Third Quarter
 3,289.75   3,006.83
 
Fourth Quarter
 3,277.38   2,874.65
         
2015
First Quarter
 3,731.35   3,007.91
 
Second Quarter
 3,828.78   3,424.30
 
Third Quarter
 3,686.58   3,019.34
 
Fourth Quarter
 3,506.45   3,069.05
         
2016
First Quarter
 3,178.01   2,680.35
 
Second Quarter (through May 24, 2016)
 3,151.69   2,871.57
 

P-11

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